LightSquared squabble raises questions about political games

The current GPS/LightSquared frequency battle could be described as Washington’s most recent electro-political struggle.

At least two years before President Obama’s January State of the Union announcement of the National Broadband Plan, entrepreneurs and investors were already dissecting its several FCC drafts, looking for business opportunities. One of these investors was billionaire subprime mortgage speculator Philip Falcone, who saw real promise in its market potential. In 2009, Falcone’s company, Harbinger Partners, began the acquisition of ailing broadband satellite operator Sky Terra, which already held an FCC license to provide nationwide Internet service via a large satellite that it had ordered from Boeing.

But for Falcone, Sky Terra, to be renamed LightSquared, also had two aces in the hole. First was its possession of radio spectrum in excess of its needs and, second, it held an FCC dispensation to operate a number of terrestrial Internet re-transmitters in areas of poor satellite reception, and both came with the acquisition. Unused radio spectrum is a rare commodity today, commanding prices in the hundreds of millions from broadcasters. (Occasionally, the FCC holds public spectrum auctions, but future auctions will be conducted more carefully. Last year the FCC accidentally sold the total block of frequencies reserved for the USAF’s B-2 Stealth bomber.)

Yet the Sky Terra acquisition still needed to be finalized before submission for FCC approval, and political connections had to be cemented. The National Legal and Policy Center reports that on Sept. 22, 2009, Falcone and LightSquared CEO Sanjiv Ahuja visited the Office of Science and Technology Policy in the White House. On the following day, Harbinger and Sky Terra signed the merger agreement. One week later, Falcone, previously a very modest Republican supporter, and his wife, Lisa, each made the maximum personal contribution of $30,400 to the Democratic Senatorial Campaign Committee. In September 2010, Republican supporter Sanjiv Ahuja contributed $30,400 to the same committee.

It was also necessary to maintain continuous contact with the FCC, so Falcone arranged for lobbyist Steve Glaze to perform that task. Coincidentally, Glaze is married to Terri Glaze, the FCC’s director of legislative affairs. However, Falcone and LightSquared were already well connected with the agency. Falcone himself was a Harvard classmate of Barack Obama, and is clearly a strong supporter of the President’s broadband plan, as is Obama appointee Julius Genachowski, the FCC chairman, who oversaw its development.

In a separate but unsubstantiated report, Genachowski was described as a “$500,000 bundler” (a bundler is someone who solicits and then gathers a number of smaller donations to a candidate) and an Obama “law school pal.” Two other bundlers at the FCC were reported to be chief of staff Edward Lazarus, and William Lake, chief of the media bureau. Genachowski’s close ties to Obama are also said to have “raised eyebrows” over the “more than 100 White House visits” paid by him and his wife, who is executive director of the President’s Committee on the Arts and the Humanities.

While one Washington observer told AIN that “This is the way the game is played in DC,” others were more circumspect, noting instances of the FCC’s “fast tracking” of LightSquared requests and, in one case, reversing its previous policy. The former Sky Terra’s license was strictly conditional on its offering satellite broadband as its primary service, supplemented by ground stations where necessary. “[The] FCC has completely turned that upside down for LightSquared,” said one, “with primary service from 40,000 ground stations and little interest in satellite broadcasts.”

Falcone’s critics claim that to provide the service he plans will cost around $40 billion, which they doubt he can raise. Reportedly, Falcone characteristically responded, “With a suitably flexible FCC, we can get the network operable for something in the region of $6 billion.”